I agree, little bit of covering might see another event like we saw in the bund in '15, however I'm not sure CBs will jump in as why wouldn't they want that freed up capital going towards more risky / productive? Just a theory but if they are making bonds unattractive on purpose, then the desired end result must surely be some sort of sell off along with new capital deciding to go elsewhere (in ECB's mind that would be the real economy). Draghi seemed absolutely unfazed when the bund was collapsing. If I remember correctly he said that's what happens at low rates... So I dunno.
So far we've heard QE will lower borrowing costs for corporations and allow / facilitate / force banks to lend more, which is great (more debt yay)... but only if there's somewhere to actually invest. With the low risk free rate, more projects should have positive NPVs so more *should* be commenced... I'm guessing that's also part of their thinking.
I believe the greater fool here is the ECB (and they're seemingly fine with that). They will undoubtedly be holding the bag and suffer losses whether they succeed in their getting their inflation target or not. Bonds should respond to inflation, and if they can't generate inflation, investors will become disillusioned with terrible yields and will likely expect the purchase allocation focus to shift away from capital keys and either towards more corporates / ABSs or the big boy... EU RMBSs. Just a hunch though. Could be way out on that one.
